Bribe older workers to retire later with cash lump sums, Government adviser recommends

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If taken forward the scheme could be used by millions of older workers to delay collecting their state pension in return for a one-off payout, which could be spent on a holiday or home improvementsCredit:
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Older workers who delay retirement will be entitled to cash lump sums worth thousands of pounds under new recommendations to encourage people work into their 70s.

The suggestion, by John Cridland, a former CBI director who is reviewing the state pension age for the Government, will inform official state pension changes due to be announced in May.

If taken forward by the Government, the scheme could be used by millions of older workers to delay collecting their state pension in return for a one-off payout, which could be spent on a holiday or home improvements.

The size of the lump sum would be based on the total value of someone's state pension income and how many years they choose to delay their retirement.

At present the new flat rate state pension is paid at £155.65 a week, or around £8,000 a year.

It would transform the current system which lets people defer their state pension in return for a slightly higher income when they do finally retire.

Paying cash up front instead would eliminate the downside of people needing to live into their 80s to benefit from the arrangement, Mr Cridland said.

The report also recommends that the Government's much trumpeted pension freedoms should be extended to state pensions.

Mr Cridland said people over State Pension age should for the first time be able to use their state pension like a bank account, allowing them to leave the balance to benefit to grow by 5.8pc a year, the annual uplift which workers are currently offered in return for deferring their state pension.

These policies should be introduced as soon as possible, but at least 10 years before State Pension age increases to 68 at the very latest, it added.

Today the Department for Work and Pensions also publishes a Government Actuaries report, which reveals that the upward revision of the state pension age to 68 will be brought forward by seven years to 2037, under Mr Cridland's proposals.

Under the recommendations it means people now aged in their mid 40s and early 50s will be forced to work an extra year, as their retirement age will move from 67 to 68.

People now in their 30s and early 40s will receive their state pension aged 69, while those aged 30 and under will have to wait until they are 70 before being entitled to state pension income.

In addition the report recommends scrapping the "triple lock" which protects pensioner incomes against inflation in the next Parliament, arguing that it is unaffordable.

Tom McPhail, head of retirement policy, said: “The good news, in as much as there is any here, is that these measures will help to keep the state pension sustainable in the long term. The proposals around employment opportunities for older workers and split deferral of the state pension should all help to extend working lives.”

“But this report is going to be particularly unwelcome for anyone in their early 40s, as they’re now likely to see their state pension age pushed back another year. For those in their 30s and younger, it reinforces the expectation of a state pension from age 70, which means an extra 2 years of work. This report also looks like the death-knell for the State Pension Triple Lock.”